Springfield City Hall. The issue of rising pension and benefits costs for municipal employees is an acute one for the city of Springfield, which, a previous study found, has the worst-funded pension system in Massachusetts.
(The Republican [file])

Municipal revenues are growing, but not by enough to offset growth in cities and towns' obligations for pensions, retiree health care and debt service, according to a new study by the Massachusetts Taxpayers Foundation.

The foundation found that in fiscal year 2013, municipal revenues and expenditures in the state grew by 3.7 percent, to $23.4 billion. The growth rate is higher than it was during the recession, but lower than it was from the 1980s through 2009.

However, the study found that increased expenditures are not only due to new services, but are to a large extent paying for spending on pensions, retiree health care and debt service. Spending in those categories grew by 23 percent between 2007 and 2012 – from $4.7 billion to $5.8 billion. At the same time, other spending grew by 10 percent – from $15.2 billion to $16.8 billion.

“Spending on employee and retiree benefits will consume an ever larger share of municipal budgets for the foreseeable future as municipalities face nearly $45 billion in unfunded liabilities,” said Massachusetts Taxpayers Foundation President Michael Widmer. “With modest revenue growth at best, funding for schools, public safety and other services will be sacrificed in order to pay for the unaffordable obligations taken on by cities and towns over the past decades.”

The study found that cities and towns had eliminated 15,500 full-time jobs between 2007 and 2012 – something the study attributes to both the recession and the growth in spending needed to keep pace with rising pension and benefits costs.

The issue is an acute one for the city of Springfield, which, a previous study found, has the worst-funded pension system in the state.

The current report does not list the total unfunded liabilities of cities and towns, but only the debt attributable to debt service – the repayment of the amount the city has borrowed to fund projects such as new schools. Using that measure, Chicopee's debt is $831 per person, Northampton's is $2,353 per person, and Springfield, Holyoke, Pittsfield and Westfield all fall between $1,200 and $1,900 per person.

The increase in local revenues was primarily driven by an increase in state aid and some increased local receipts – auto excise taxes, meal and hotel taxes and building permits. But property taxes grew at their slowest rate in decades, and there was little new construction, the report found.

Among Western Massachusetts cities, Springfield was the only city that spent less in 2013 than in 2012 – the amount it raised to cover local expenses was 1.6 percent less than the previous year. It also saw little new construction growth.

Growth rates among other Western Massachusetts cities, measured by the amount of money they raised, were closer to the statewide average of 3.7 percent: Chicopee grew by 4.2 percent, Holyoke by 3 percent, Northampton by 2.6 percent, Pittsfield by 5.1 percent and Westfield by 3.1 percent.